The Reserve Bank is going to hold a three-day monetary policy review meeting from Tuesday. In the opinion of experts, the Reserve Bank should not expect to cut interest rates this time. At present, inflation is a major challenge, due to which the RBI will not take a decision to change the rates at present. Former finance secretary Ashok Jha said in a conversation with Hindustan that at present there is sufficient liquidity in the system due to the economic package given by the government and the old steps of RBI. In such a situation, it will not be possible to cut another rate of interest. He also said that RBI will maintain the status quo of all policy rates.
However, in the meeting of the Monetary Policy Committee, it will definitely be discussed what other non-traditional measures can be taken to ensure financial stability in the economic situation arising after the unlock. According to the data, the repo rate has been cut by 1.15 percent since February this year. Also, banks have given a benefit of 0.72 per cent of this on new loans to customers. Some big banks have made loans cheaper by up to 0.85 percent. The Reserve Bank wants to keep the inflation rate around 4 per cent, but in June it went above 6 per cent. In such a situation, the scope for further reduction in interest rates is very less.
Preparations to bring economic growth back on track
The Reserve Bank’s Monetary Policy Committee (MPC) is scheduled to meet this week amid the rush to return the growth-hit economy affected by the Corona virus epidemic and the demand for one-time debt restructuring by industry organizations. However, there is no consensus among experts on whether the committee will cut the policy rate in this week’s meeting. Many experts are of the opinion that a one-time restructuring of debt is more necessary in the current situation.
The three-day meeting of the Monetary Policy Committee headed by the Governor of the Reserve Bank will begin on August 4. The committee will announce the results of the meeting on August 6. The Reserve Bank has been taking proactive steps for some time to limit the impact of the corona virus epidemic on the economy and the lockdowns implemented for its prevention. The rapidly changing macroeconomic situation and the deteriorating scenario of growth necessitated the Reserve Bank’s rate-fixing committee meeting in March and then in May ahead of time.
PwC Partner and Leader (Financial Risk and Regulation) Kuntal Sur said that the Monetary Policy Committee, while adopting a liberal approach, has reduced the repo rate by 1.35 per cent in the last one year. “Given the priority of growth, we expect a soft trend to continue,” he said. However, there is sufficient liquidity in the system and the benefit of the rate cut is being passed on to the customers, so the rate reduction may stop. Chandrajeet Banerjee, director general of the Confederation of Indian Industry (CII), said that in the current soft economic environment, the Reserve Bank should focus on regulatory exemptions to prevent the fiscal deficit from rising. “Banks and financial institutions may be allowed to provide one-time restructuring of all term loans, so that companies can get back on track,” he said. Credit Guarantee Scheme for Micro, Small and Medium Enterprises (MSME) has given better results.